Why It's Often a Mistake to Rely on Representations from Government Officials

File this one under "you can't believe your lying eyes." A major law firm, O'Melveny & Myers, signed a contract with the Department of Energy to provide it with legal services in connection with the sale of a petroleum reserve. As with virtually all federal contracts, this one contained clauses indicating that the parties were subject to particular paragraphs of the Federal Acquisition Regulation requiring them to comply with federal executive orders relating to employment discrimination against minorities and women, the disabled, and Vietnam era veterans. In other words, the contract required the law firm to submit to the jurisdiction of the OFCCP and its compliance process.

For whatever reason, the firm elected to disregard these provisions, and instead relied on the oral pronouncements of the chief of the OFCCP's Defense Contracts Administration in Los Angeles that the provision of legal services under these circumstances was not within OFCCP's jurisdiction.

(As an aside, I typically counsel my clients to never, ever, rely on anything they are told over a telephone, or even in person, by a federal or state employee with respect to an interpretation of the regulations or laws the employee routinely enforces).

Law firms traditionally shy away from doing anything that will make them subject to the OFCCP's oversight. The large firms with which I've worked assiduously assessed whether they might be obligated to respond to an OFCCP request for information, and carefully avoided doing things that would bring them under OFCCP supervision. That's because virtually no law firm that I'm aware of could withstand an OFCCP audit of its employment practices. The numerical disparities involving women, minorities, and veterans in big law leadership would raise red flags under the most benign employment audits, nevermind what would happen under the tilted OFCCP process.

In any event, when the OFCCP compliance officers appeared on the law firm's doorstep, asking for the law firm's pay and compensation data, the firm blew them off, and cited the above-mentioned opinion of the OFCCP official. At the resulting hearing before an administrative law judge, the firm tried to argue that, notwithstanding the presence of its signature on the contract with DOE, it was not a party to a "federal contract" (I think even the administrative law judge had difficulty swallowing that one), and, even if it was, it was not providing "nonpersonal services", as required for OFCCP jurisdiction. The ALJ brushed aside the firm's interpretation of the requirement, noting that similar arguments in the healthcare industry had been rejected last year.

The end result, then, is that the law firm was ordered to comply with OFCCP procedures. I suspect there will be an appeal on this case, but regardless, this is a warning shot across the bows of law firms that are not only providing services directly to federal agencies, but that are providing services in support of federal contractors. OFCCP jurisdiction is quite expansive, and has been known to reach out and ensnare not only federal contractors, but companies working with federal contractors, sometimes even the companies that are not involved in the performance or support of the federal contract in any way. This case is a powerful warning that firms need to assess whether their work for federal contractor clients might entangle them in OFCCP jurisdiction, with all the accompanying affirmative action headaches and disclosures.